Oil Field Suppliers Dresser, Baroid Plan to Merge in $900-Million Deal

Dresser Industries Inc. and Baroid Corp., two key suppliers to the oil-drilling industry, said Tuesday that they will merge in a deal valued at $900 million.

Under the agreement, Dresser will acquire all of the shares of Baroid in a tax-free exchange of stock, the companies said.

Shares of Baroid rose 75 cents to $8.375 while Dresser’s stock lost 25 cents to close at $22.50 on the New York Stock Exchange.

Dresser said the merger is expected to be completed in mid-January.

“The merger of Baroid and Dresser creates one of the broadest ranges of oil field products and services in the industry,” said Landis Martin, Baroid’s chairman and chief executive, who will be appointed to Dresser’s board.

The merger will allow Dresser to enter two new energy service areas and should be positive for the company’s earnings over the long term, analysts said.

The overlapping area in which Dresser and Baroid each has a significant presence is drilling fluids, which are used to lubricate and flush out drilling operations and stabilize any upward surge in pressure from gas, oil or water in a well.

The drilling fluids business of both companies combined would have more than 50% of the worldwide market in fluids, said James Carroll, analyst at Paine Webber.

The Justice Department must decide whether an antitrust issue would be involved in combining the two drilling fluids businesses, analysts said.

Dresser will abide by whatever the Justice Department decides and will sell one of the drilling fluids businesses if necessary, a company spokesman said.

“The Department of Justice will have a chance to review the situation,” Dresser spokesman Donald Galletly said. “Whatever they decide, we’ll act on. We’re prepared to take their advice on the issue.”

The full impact of the merger on Dresser’s bottom line will not be seen until fiscal 1995, analysts said.

Dresser said it does not expect the merger to affect the company’s positive earnings-per-share outlook for next year, adding that “the merger will help generate substantial additional future earnings momentum.”

“Longer-term, it could enhance them,” said Philip Kehl, analyst at Dean Witter.

The terms of the agreement provide that each share of Baroid common stock be exchanged for 0.40 share of Dresser common stock, provided the average daily price of Dresser stock is between $20 and $28 during a specified period.

If the average price of the shares is above or below the range, the price will be adjusted.

Dallas-based Dresser’s revenue in 1992 was $4.8 billion. Baroid, based in Houston, had revenue of about $755 million last year.